U.S. companies have officially invested half a billion euros in the last ten years, but estimates say those investments are much higher. Namely, the investor can be from the USA, but the fund with its funds can be registered in the Netherlands or some other country with a legal system suitable for the seat of the fund.
In this text, we will present three significant US direct investments in Serbia, two are Brownfield and one Greenfield. Brownfield investment means investing in an existing company, while Greenfield investing means opening a new company.
Among the leading American investments is the purchase of the Tobacco Industry Nis, from the Phillip Morris Corporation in August 2003 through the privatization process, which led to an investment of 636 million euros and the employment of over 1,150 people. Also in 2003, US Steel bought Serbian steelmaker Sartid. The total amount of that investment now exceeds 300 million dollars, and this purchase led to the employment of 5,000 people.
Colorado Ball Corporation made the largest greenfield investment in Serbia worth 75 million euros for the production of cans. In February 2005, Coca-Cola bought bottled water producer Vlasinka for 21.5m euros. In January 2008, Meryl Lynch became a 25% owner of MPC Properties, a real estate company that worked on the construction of the Usce shopping center.
Below you will see a summary of the business results of Coca Cola, Philip Morris and Ball Packaging, three companies that have been operating in Serbia for many years.
1. COCA COLA
Coca-Cola is a beverage manufacturer that offers consumers more than 500 brands in over 200 markets worldwide. In addition to Coca-Cola products, the company’s portfolio includes valuable beverage brands, including carbonated beverages, bottled water, juices, teas and iced beverages, energy and sports drinks.
Coca-Cola has been operating in Serbia since 1968, when a factory for bottling Coca-Cola beverages was opened in Zemun. Thanks to the acquisition of Vlasinka d.o.o. from Surdulica in 2005, but also from the company Fresh & Co in 2006 from Subotica, the company’s portfolio became richer for the famous natural spring water Rosa, but also non-carbonated juices neXt, Su-voce and Joy. In 2016, the Coca-Cola system invested 3.8 million euros in a production plant in Serbia and opened a regional juice center in Belgrade. In 2019, one of the leading domestic manufacturers of confectionery products, Bambi, became part of the Coca-Cola HBC Group.
Coca-Cola has been generating stable operating revenues over the years. We can notice a larger decline in revenue in 2019 compared to 2018, approximately 130 million euros. However, the company also recorded the lowest expenses in the observed five years. Stable liquidity ratios over the years as well as high turnover ratios of fixed and current assets. Gross margin is at a very high level of 70.9% in 2015, which records a slight downward trend. On the other hand, the net profit margin is at a lower level with a growth trend. Average number of employees more than 800 employees per year.
2. PHILLIP MORRIS
Philip Morris, a company operating in the tobacco industry, in 2003 privatized the largest Serbian tobacco factory – DIN “Tobacco Factory” a.d. Nis and thus started doing business on the Serbian market. Since 2003, PM has invested more than 800 million in the Serbian subsidiary, showing it is one of the largest investors in the country. The factory in Nis is one of the most modern factories in the global network of companies of Philip Morris. The most important brands of the company are Marlboro, Parliament, L&M and Bond Street.
Philip Morris has fluctuations in revenues, first you can notice a large increase in operating revenues, then a decline since 2016. Gross profit margin high with declining trend. On the other hand, the net profit margin and the number of employees are constantly increasing. Liquidity is stable as well as the rate of return on invested capital, which has above-average values.
3. BALL PACKAGING
The Ball Company has been producing drink cans since 1880. Although at that time they were not made of aluminum, but of wood, then of glass, the company has been successfully overcoming market demands for 140 years. Since 1956, Ball has also been manufacturing parts and products for the aerospace industry. It has been operating in Serbia since 2004, when a factory was opened in Zemun, and so far over 140 million euros has been invested in the development of production. Ball in Serbia employs over 250 workers and annually produces about 1.5 billion cans, of which 80% are exported. Ball is also a socially responsible company that takes care of the environment, in addition to recycling, which is highly represented in aluminum processing. Ball in Serbia, through the activities of the non-profit organization Recan, has been spreading awareness about the necessity of recycling for years. So far, they have organized over 150 events and recycled over 60 tons of cans. Aluminum can be recycled indefinitely, only 0.4 g of aluminum is lost per 10 grams of can. It is also important to note that Ball is one of the largest Greenfield investments in Serbia.
The company has been generating stable revenues with a growth trend in the past five years. The number of employees varies from year to year, averaging about 200 employees. Liquidity ratio at a very high level, average liquidity ratio 2.95 over five years. It has an average gross profit margin of 66%. The average net profit margin is significantly lower at 15.26%.
LARGE CORPORATIONS HAVE THEIR ORIGINS TO INVEST IN SERBIA
Foreign direct investment is a characteristic of modern economic relations and the process of globalization. Some will point out that when foreign companies invest in our country, they only use labor and make a profit, but there are other positive effects that should not be ignored, such as e.g. technology and knowledge transfer, contribution to the country’s GDP growth, employment of a large number of people, etc.
Of course, large corporations have their own motives for investing in Serbia, some of these motives are:
• lower operating costs, mainly in terms of labor costs
• proximity of raw materials needed for production
• avoidance of customs and other costs of export to target markets
• reduction of transport costs of product delivery to target markets
• gaining experience working in promising markets
• takeover of companies that are in direct competition in target markets or that
they can become
• acquiring rights to patents and technology owned by companies abroad
• Facilitating the development of the company in a better business environment
• avoiding the limiting factors of domestic research regulations and development
• state subsidies
Nova Ekonomija reports.
